Sri Lanka targets reduced deficit, low inflation

The Sri Lanka government has said it has prioritised its economic policies to achieve a lower deficit and moderate inflation.

"High inflation is a tax on the poor. We must try and reduce inflation. My personal opinion is that it is far better to reduce inflation that raising wages," Deputy Finance Minister Sarath Amunugama said.

Addressing a gathering in the central district of Kandy yesterday Amunugama said the government was able to bring down inflation from 20 per cent to 7 per cent in the recent period.

However, the official figures for October shows inflation at 8.9 per cent.

President Mahinda Rajapaksa presenting the 2013 budget earlier this month said the budget aims to reduce the island's fiscal deficit to 5.8 per cent of GDP in 2013.

The government said the deficit was now in line with the 6.2 per cent agreed with the IMF.

Amunugama said the deficit which was 6.9 per cent in 2011 would be brought down further.

"We have a fiscal deficit of Rs 500 billion so we need to promote the habit of saving. We can't be printing money to promote the habit of saving. We can't be printing money to finance the deficit", Amunugama said.